IP SPOTLIGHT OCT 23

IP SPOTLIGHT NEWS FROM AUSTRALIA

23 October 2020

AUSTRALIAN R&D TAX UPDATE: WELCOME NEWS FOR OUR CLIENTS AND INNOVATORS

In its 2020-21 Budget, the Australian Government will provide a further AU$2 billion in additional research and development tax incentives (RDTI), promoting that the boost will help businesses manage the economic impacts of the COVID-19 pandemic. This is aimed at reversing a decline in R&D expenditure from $17.32 billion in 2015-16 to $11.92 billion in 2018-19.

Compared to the reforms and potential cuts that were before the Senate, this boost in RDTI is welcomed news for our clients and innovators. The changes were passed as part of the Government’s omnibus Treasury Laws Amendment (A Tax Plan for the COVID-19 Economic Recovery) Bill 2020. The Federal Government provided in its Budget documents that for small companies, with total annual turnovers of less than AU$20 million, the refundable R&D tax offset will be set at 18.5 percentage points above a company’s tax rate, and the AU$4 million cap on annual cash refunds will be canned. For larger firms, with annual turnovers of AU$20 million or more, the Government said it will reduce the number of intensity tiers from three to two. “This will provide greater certainty for R&D investment, while still rewarding those companies that commit a greater proportion of their business expenditure to R&D”, Treasurer Josh Frydenberg said during his Budget speech. The new measures will commence on 1 July 2021.

CRAIG HUMPHRIS Principal

The Australian Patent Office confirms that patent term extensions application can (and sometimes should) be based on third party products. In the recent Australian Patent Office decision of Ono Pharmaceutical Co., Ltd. et al [2020] APO 43, the Office has confirmed that a patent term extension ( PTE ) must be based on the first pharmaceutical product containing a pharmaceutical substance falling within the scope of the claims that is included on the Australian Register of Therapeutic Goods ( ARTG ), regardless of whether or not the patentee is the sponsor of that pharmaceutical product. This decision confirms the earlier Patent Office decision of G.D. Searle LLC [2008] APO 31 ( Searle ), and has implications for patentees seeking to rely on the PTE regime moving forward. BACKGROUND The term of a standard patent in Australia is 20 years. 1 However, provisions in the Patents Act 1990 (Cth) ( the Act ) provide for the term of certain patents relating to pharmaceutical substances to be extended by up to five years under the PTE system. – – at least one pharmaceutical substance per se , or a pharmaceutical substance produced by a process that involves the use of recombinant DNA technology ( PSPS ), must in substance be disclosed in the specification and fall within the scope of the claims 2 – – goods containing or consisting of the substance must be included in the Australian Register of Therapeutic Goods ( ARTG ) 3 – – the first regulatory approval for that pharmaceutical substance must have occurred more than 5 years after the date of the patent 4 – – the application must be made within 6 months of either the date the patent was granted or the date of the “first inclusion” in the ARTG of goods that contain or consist of any of the PSPS, whichever is later. 5 The following factors must be satisfied in order to obtain a PTE:

The length of the extension is calculated by determining the period beginning on the date of the patent and ending on the “earliest first regulatory approval date”, reduced by 5 years. However, the maximum term of the extension is 5 years. 6 THE I SSUES AND PATENTEE’S SUBMI SS IONS The present case concerned Australian Patent Number 2011203119 in the name of Ono Pharmaceutical Co., Ltd. and E. R. Squibb & Sons, L.L.C. ( Ono ), which included claims to antibodies that competed with certain reference antibodies and which had a particular affinity to the target, immune checkpoint inhibitor PD-1. – – KEYTRUDA, which was included first on the ARTG, but was sponsored by the competitor Merck Sharp & Dohme – – OPDIVO, which was included second on the ARTG, and was sponsored by Ono. Ono’s request was based on OPDIVO (its own product), because this would result in a longer extension period, and would mean that the PTE application was filed within the 6-month window. Ono had also filed a separate PTE request based on KEYTRUDA in the event that its application based on OPDIVO failed (together with an extension of time request as the application was outside the 6-month window based on the ARTG inclusion of KEYTRUDA). The claims covered two blockbuster drugs, each of which comprised a different PSPS:

AUSTRALIAN PHARMACEUTICAL PATENT TERM EXTENSION UPDATE

The present decision only dealt with the PTE application based on OPDIVO.

Ono submitted that the Act contemplated that multiple PSPSs could be disclosed within a patent and that the PSPS on which the application was based was the subject to be considered when deciding whether the timing provisions were satisfied and for calculation of the length of extension, rather than substances that may already exist on the ARTG.

1 Section 67 Patents Act 1990 (Cth) 2 Section 70(2) Patents Act 1990 (Cth) 3 Section 70(3) Patents Act 1990 (Cth) 4 Section 70(3) Patents Act 1990 (Cth) 5 Section 71(2) Patents Act 1990 (Cth) 6 Section 77, Patents Act 1990 (Cth)

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“ Patentees should also consider filing separate patent applications for each PSPS to ensure that the maximum period of extension can be sought for each patent, based on the relevant ARTG inclusion. ”

Ono also argued that the PTE should be based on OPDIVO (it’s own product) rather than KEYTRUDA (third party product) because the policy objectives of the PTE scheme would be frustrated if the timing for making an application and the length of the extension were calculated based on a third party’s registration. The patentee submitted that the policy objectives were to compensate patentees for the additional time, expense and difficulty in developing and commercialising a “new drug”. If the PTE could be based on a third party product, the result would be “manifestly unreasonable” because it would expose the Commissioner to making errors in recording PTEs on the register as PTE applications may inadvertently be based on the incorrect (patentee’s) product, particularly if the patentee was not aware of a third party product on which the application should have been based. Ono provided a list of burdens that would be placed on the Commissioner and patentees if third party products could form the basis of PTE applications. In making these arguments, the patentee asked the Delegate to reconsider the prior Patent Office decision of Searle. In Searle, where there were two PSPSs within the scope of the claims that had been included in the ARTG at different times, the Patent Office decided that the PTE application had to based on the product that was first included on the ARTG, regardless of the sponsor. DECI S ION The Delegate did not accept Ono’s submissions and confirmed the Searle decision. Whilst the Delegate acknowledged that there is some ambiguity in the Act as to which PSPS was referred to in each section, there was nothing in the Act or the prior case law that suggested that only products on the ARTG sponsored by the patentee could form the basis of a PTE application. The reference to the “first regulatory approval date” and “first inclusion” was a reference to the earliest inclusion on the ARTG of the first product (regardless of the sponsor).

Furthermore, if the 6-month window for filing the PTE application has been missed because the patentee was unaware of a relevant third party ARTG application, the patentee will have to seek on extension of time in order to file its application. Extensions of time can be very difficult to obtain as there are strict requirements that must be satisfied in order to qualify. We therefore recommend these deadlines are closely monitored (including both the deadline triggered by patent grant and any deadline triggered by ARTG listing). Patentees should also consider filing separate patent applications for each PSPS to ensure that the maximum period of extension can be sought for each patent, based on the relevant ARTG inclusion.

The Delegate also reviewed the policy considerations around the PTE regime in considering whether this outcome was “manifestly absurd or unreasonable”. The policy behind the PTE regime was to compensate patentees for the time and expense taken to commercialise a “new drug”, as stated in the explanatory memorandum and second reading speech. The Delegate considered that if there was already a drug falling within the scope of the claims on the ARTG, the patentee was not seeking an extension for a “new drug”, and therefore, the policy considerations did not support the patentee’s position. To the extent that there may be errors on the register due to PTEs granted on based imperfect information, the Delegate pointed to the power to correct the Register under section 191 of the Act. WHAT DOES TH I S MEAN FOR PATENTEES? This decision makes it clear that both the deadline for filing a PTE application (i.e. the 6 month window) and the length of any PTE is calculated based on the first inclusion on the ARTG of a product that contains any PSPS claimed in the patent, regardless of who the sponsor of the product is. Patentees should therefore be careful to monitor the ARTG for any third-party products that may contain PSPSs falling within the scope of their claims, as the clock may start ticking well before the patentee has registered their product on the ARTG.

BINDHU HOLAVANAHALLI Associate

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Who may be granted a patent?

Meanwhile, the conversation has now made it to Australia following the national phase entry of one of Steven Thaler’s applications (AU2019363177). Currently, the application is subject to a formalities objection stating (perhaps unsurprisingly) the same position as in the UK – that the inventor must be a natural person. However, our review of the legislation has revealed that there is no such restriction in Australian law. In the following article, we review some of the issues around this push for recognition of non-human inventors.

According to s15(1) of the Patents Act:

– – Subject to this Act, a patent for an invention may only be granted to a person who: a. is the inventor b. would, on the grant of a patent for the invention, be entitled to have the patent assigned to the person c. derives title to the invention from the inventor or a person mentioned in paragraph (b) or d. is the legal representative of a deceased person mentioned in paragraph (a), (b) or (c). (emphasis added). It is clear from the preamble of s15(1) which clearly references “a person”, that, even when the Applicant is the inventor, the Applicant must indeed be a legal person as defined under s2C of the Acts Interpretation Act (i.e. that being a body politic or corporate or an individual). However, ‘inventor’ is not defined in the Patents Act, and Reg 3.2C(2)(aa) only requires that the inventor be named on the application. There is no explicit reference to whether an inventor must be a person: natural, legal or otherwise; only that when the Applicant is also the inventor, the Applicant must be a person. We expect that this possible loophole in the legislation will be emphasised during prosecution of Thaler’s Australian application. When the Applicant is not the inventor, Applicants (including corporations) usually acquire rights from the inventor by legal succession, e.g. through their employment contract or assignment. Where there is no express term in an employment contract, ownership can become controversial. In many jurisdictions, Applicants are required to file an assignment showing that the inventor/s have formally assigned their rights to the Applicant. In Australia, an explicit statement or notice asserting how the Applicant gained entitlement to the invention from the inventor is usually sufficient. A notice of entitlement can be in a generic form. For example, the requirement is satisfied by a notice in the form: “I/We, state that the applicant (or each joint applicant) is an actual inventor, or derives title to the invention from an actual inventor(s), or would, on the grant of the patent, be entitled to have the patent assigned to them. Who may be the Applicant?

THE LAW ON ‘ I NVENTORSH I P ’ AND ‘OWNERSH I P ’

Inventorship

The requirement for inventorship differs from jurisdiction, but many jurisdictions require that the inventor be a natural person. Article 4.A.(1) of the Paris Convention for the Protection of Industrial Property states that ‘[a]ny person who has duly filed an application for a patent … in one of the countries of the Union, or his successor in title, shall enjoy, for the purpose of filing in the other countries, a right of priority…’. Article 4.A(1) further provides that ‘the inventor shall have the right to be mentioned as such in the patent.’ (Emphasis added). When read more closely, there is no written requirement that the ‘inventor’ actually be a natural person, only that the Applicant be a “person”. Unlike the UK, this also appears to be the current legislative position in Australia. (We note that corporations may be an Applicant due to their statutory status as a legal “person” under the Acts Interpretation Act 1901 and as such they do not form part of this discussion). A number of commentators have formed the view that it is inherent in these provisions that inventors are people, especially given that, when the Paris Convention was adopted in 1883, no one would have ever considered that computers would take over the world the way that they have. We also note that we are not aware of any patent application where a corporation has been listed as an inventor, despite their status as a legal person. In our view, who an inventor may be (or may not be) really has not been made clear in the legislation, thus leaving this term open to interpretation.

IS ARTIFICIAL INTELLIGENCE REALLY INTELLIGENT?

The latest debate – can AI “invent” something? Or is it just following standard protocol?

and ignited debate on whether or not a patent can be granted for an invention generated by an AI system.

THE DETA I LS The Artificial Inventor Project, which is behind the DABUS applications, has been contentiously advocating for AI to be named as an inventor through the patent system (as opposed to through legislative changes). This discussion began in the UK where, as it currently stands, an inventor must be a natural person. This position was affirmed by the UK patent office and also in the English High Court, which was the first judicial consideration of issues relating to machine inventorship. Similar appeals are afoot in the US and the European Patent Office (EPO).

SUMMARY With the increasing reliance on computerised systems and processes, the term ‘artificial intelligence’ (AI) is now a part of everyday vocabulary. But does anyone really understand what it means? And is AI really intelligent as the name may suggest? Recently, two Australian patent applications were filed naming an AI system called ‘DABUS’ as an inventor; and its creator, Steven Thaler, as the Applicant. These applications have forced us to reconsider what an ‘inventor’ really means,

Regardless of where you sit, this topic is now open for debate.

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“ The fundamental problem with AI is fairly simple: despite the massive processing capacity of AI, in every case, a finite number of input parameters is converted during processing into a corresponding and finite number of output parameters based on a specific set of algorithms, pre-programmed by a human. ”

So if AI is the inventor of a patent, this raises two very important questions:

– – does AI have the capacity (and the right) to assign a patent to a person? – – can a person (or corporation) be entitled to derive title to an invention from AI? Although under Australia law a written assignment is not strictly necessary in all circumstances, s14(1) of the Patents Act stipulates that: Given that s15(b) essentially requires that the Applicant, on the grant of a patent for the invention, be entitled to have the patent assigned [to them], it is clear that the possibility of an executed Assignment existing at some stage must be a real one. On face value, it would seem to be the case that AI is not capable of signing such an Assignment document. However, even if AI was somehow physically capable of signing the document, would AI understand what it was that it was signing? Which then raises the issue of informed consent. Regardless, is it even legal for AI itself to hold property to then assign? Turning to question 2, is the creator of the AI somehow entitled to automatically derive title to the invention from the AI? We believe that, absent of any legislative guidance, the answer to that question may depend, in part, on whether or not the AI would be considered an ‘inventor’. I S A MACH I NE CAPABLE OF ENGAG I NG I N ‘CREAT I VE’ OR ‘ I NVENT I VE’ ACT I V I TY? Legally, we believe it will be very challenging to win the argument that AI can be an inventor, especially in jurisdictions where inventorship is clearly restricted to natural persons. In most jurisdictions, we imagine that changes would be needed at the legislative level, rather than in court, before AI’s will be considered inventors. However, this push has ignited a debate on the topic in several jurisdictions, including the World Intellectual Property Office (WIPO), who called for submissions on the topic from the public in February 2020. Unless legislative changes are made to allow AI to be an inventor, we consider that the current debate will revolve around whether or not a computer, following only the algorithms pre-programmed into it by a human, can be said to demonstrate ‘invention’ or ‘creativity’. An assignment of a patent must be in writing signed by or on behalf of the assignor and assignee.

If AI cannot invent, and yet AI can generate an invention, who then, if anyone, is the inventor? Is it the person who built and programmed the AI? We find this challenging to accept since that person technically did not arrive at the invention directly using their own intellect. In addition, any provision in the legislation to ‘derive title’ to the invention under s15(c) requires that the Applicant derives title to the invention from the inventor . If AI is not an inventor under our current understanding of the term, then no title can be derived therefrom. Therefore, in our opinion, as it currently stands, the creator of the AI can be neither the inventor nor the Applicant. This debate has ignited several legal and philosophical debates and has raised more questions than it has answered. Whilst it is possible that one day, policy may allow for a non-human inventor, it is clear from the various world-wide reactions that first impressions are against this idea. However, how this plays out in Australia is yet to be determined. Whilst there appears to be no legislative provision in Australia preventing AI from being an inventor, we are of the opinion that even if this is acknowledged at the office, it will still be challenging to argue that (1) AI has inventive capacity and (2) also has the ability (and legal right) to assign its invention over to a third party. As such, we believe that this will ultimately be resolved at the policy level, not in the court system.

Under Australia law, the issue of inventive step is whether or not, in light of the common general knowledge and/or the prior art, it would have been obvious to the person skilled in the art to arrive at the invention as claimed. The word “obvious” suggests that it does not go beyond the normal progress of technology, but merely follows plainly or logically from the prior art. The fundamental problem with AI is fairly simple: despite the massive processing capacity of AI, in every case, a finite number of input parameters is converted during processing into a corresponding and finite number of output parameters based on a specific set of algorithms, pre-programmed by a human. One view point is that simply following the pre- programmed protocol can hardly be described as ‘creative’, even if the output results may be regarded as ‘surprising’ (and might also fit the definition of an invention). What we essentially get from AI, is a superficial mimicry of the process of ‘invention’, without any of the psychological characteristics associated with human ‘creativity’ or ‘inventiveness’. Therefore, even though a patentable invention may have been generated, without any inventive capacity under our current understanding of the term, it is hard to image how AI could be considered to have invented anything and thus should not be considered an inventor. An inventor is simply a person (or team of people) who have the intellectual capacity to follow a non-routine pathway to arrive a unique product (or method), and then recognise the significance and usefulness of the invention. AI is neither capable of following non-routine (or non-pre-programed) steps, nor of recognising the significance of its output. All it knows is what it is programmed to do.

Watch this space for more…

DONNA MEREDITH Associate

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Did the Delegate ask the correct questions?

The main concerns considered in the decision related to:

That no one had ever done it before, despite the obvious benefit of reducing side-effects, could point to the inventiveness of the claim. It is for this reason that we have reservations over the completeness of the Delegate’s reasoning on this critical point. Since these important questions were not asked, we believe that the Delegate may have been at risk of using hindsight to arrive at their conclusion of obviousness, having already been aware of the final solution and its benefits (i.e. reducing interference in combination vaccines) and neglected to acknowledge that interference in claim 1 of ‘535 was not relevant. Separately, consideration was also given to the term “substantially free” in the phrase substantially free of both (i) IgG and (ii) antigen-bound immunocomplexes. Whilst no clear definition was provided in the specification, the Delegate determined that sufficient evidence was provided in the examples and tables to allocate this term a clear, measurable, numerical value. Whilst this was resolved in the Applicant’s favour, this serves as a timely reminder to Applicants that including vague and imprecise terms such as “substantially” in the claims brings with it the risk of opening up such terms to attack. TAKEAWAYS This case highlights the dangers of combining proceedings in patent applications of similar subject matter. It is clear that the Opponent and the Delegate centred their line of questioning around issues which were not relevant to the claim in question and therefore should not have been discussed. It is also our opinion that the Delegate may have been prejudiced by matters which should have been considered later, and asked the wrong questions and potentially allowing themselves to be influenced by motivations discussed in relation to the other applications which should not have been considered until after a decision in the ‘535 application had been made. Lastly, this case serves as a timely reminder for Applicants that it is always prudent to clearly define each term in the claims, or to avoid vague terms completely, rather than hoping to rely on remedies in the examples and results. Zoetis have since filed a Notice of Appeal against this decision and we look forward to reporting the outcome of this appeal.

The Delegate’s decision states that:

– – was it obvious to produce a pig vaccine from the soluble fraction of the culture (rather than with the whole cells included)? Although not common general knowledge at the time, this was found to be obvious in light of the prior art – – was it obvious to remove neutralising antibodies and immunocomplexes from a pig vaccine to reduce interference? – – was it obvious to produce a combination vaccine? [Found to not be obvious] – – was it obvious to manufacture the combination vaccines in a one-bottle, ready-to-use single formulation, rather than as a multi-dose/multi-bottle vaccine? [Found not to be obvious]? Turning to question (2), in the Decision under the heading “The Problem”, the Delegate noted that the specification discusses the disadvantages of interference in prior art multivalent vaccines and this is where the Opponent focused their evidence. However, claim 1 of ‘535 is a single-target vaccine (where interference is not relevant) and there was no suggestion in claim 1 of it even being compatible with other antigens, so it is unclear as to why the discussion turned immediately to interference observed in multivalent vaccines (the concept of a multivalent vaccine was not introduced until claim 3). The Delegate found that it was obvious to remove non- specific antibodies from a single-target veterinary vaccine, despite there being no evidence of this having been done before in a pig vaccine (evidence in human vaccines was presented but not pig), and despite all the discussion around the possible motivation being directed to reducing interference in multivalent vaccines. When questioned how to produce the Applicant’s vaccine starting from the prior art, the Applicant’s expert provided a routine method of simply using a different serum which was less likely to contain antibodies in the first place. However, this response was again in relation to a question about reducing interference in multivalent vaccine production, rather than in response to a question about why one would want to remove the antibodies from a single-target vaccine where interference was not an issue.

I, therefore, find that from (the Okada documents) either using a separate step to remove immunocomplexes and IgG or to start with fetal serum would have been a routine step that the person skilled in the art would have done. Claim 1 of the ‘535 application does not involve an inventive step in light of the Okada documents and the common general knowledge. In our opinion, the questions should not have been was it obvious how one would arrive at the claimed invention from the prior art invention? or how would the skilled addressee reduce interference when producing a combination vaccine? , but rather why would one be motivated to arrive at the claimed invention in light of the prior art and CGK? If it was so obvious to remove non-specific antibodies from a vaccine, why had it not been done before in any single-target pig vaccine? It is these critical questions which we believe were not addressed by the Delegate. It is a well-known principle that if a claim solves a “long felt need”, there is a presumption that it is not obvious, as other inventors must have also tried to solve the need and not succeeded: “... the question of obviousness is probably best tested, if this be possible, by the guidance given by contemporaneous events. ... If an invention has resulted in the solution of a problem which has been troubling industry for years and achieves immediate success upon its introduction, then the suggestion after the event that the step was obvious inevitably rings a little hollow.” Solving a long-standing problem using a routine solution that no one had yet thought to implement is useful evidence to prove that the person skilled in the art would not be directly be led as a matter of course to try [the invention as claimed] in the expectation that it might well produce a useful result. We find it very curious that the Delegate did not address this in their considerations. No discussion was provided as to whether or not the evidence concerning human vaccines influenced the Delegate’s decision. Nor was the inventiveness of the purifying step discussed in relation to addressing the long-standing issue of side-effects. (Lucas and Another v Gaedor Ltd and Others [1978] RPC 297 at page 358).

DONNA MEREDITH Associate

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Wednesday 5 August 2020 9am (AWST)

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Thursday 6 August 2020 9am (AWST)

Thursday 6 August 2020 10am (AWST)

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